Assume that due to lobbying the government in Home considers introducing a specific tarifft on imports....

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Assume that due to lobbying the government in Home considers introducing a specific tarifft on imports. a) Explain the difference between a specific and an ad-valorem tariff. b) Show analytically and graphically the potential effects of this policy on (i) prices in each country, (ii) quantities supplied and demanded in each country, and (iii) quantities traded in equilibrium. What would be the tariff rate Home should impose in order to maximize government revenues? d) What are the effects of an import tariff on the distribution of national welfare in Home? Show graphically the effects for (i) Home producers (ii) Home consumers (iii) Home government. e) Show graphically and determine the terms of trade gain, the efficiency loss, and the total effect on Home's welfare of the tariff (Hints: area rectangle = ab; area right-angled triangle = ab.). f) How do results from d) change if Home is small, i.e. not affecting world prices? Assume that due to lobbying the government in Home considers introducing a specific tarifft on imports. a) Explain the difference between a specific and an ad-valorem tariff. b) Show analytically and graphically the potential effects of this policy on (i) prices in each country, (ii) quantities supplied and demanded in each country, and (iii) quantities traded in equilibrium. What would be the tariff rate Home should impose in order to maximize government revenues? d) What are the effects of an import tariff on the distribution of national welfare in Home? Show graphically the effects for (i) Home producers (ii) Home consumers (iii) Home government. e) Show graphically and determine the terms of trade gain, the efficiency loss, and the total effect on Home's welfare of the tariff (Hints: area rectangle = ab; area right-angled triangle = ab.). f) How do results from d) change if Home is small, i.e. not affecting world prices?

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a A specific tariff is a tax imposed on imported goods based on the quantity of the good while an advalorem tariff is a tax imposed on imported goods based on their value b i Prices in each country wi... View the full answer